Non Sequiturs on Parade – PART IV

This is a respite from discussing the overt errors in Steve Roth’s article “Why Welfare and Redistribution Saves Capitalism from Itself.”^[i] Previous discussions of these can be found in PART I, PART II, and PART III.

Here, I want to 1) acknowledge something good that Roth did in his article, 2) acknowledge that income inequality (the evils of which are Roth’s unstated presumption for the article) creates problems for individuals and society, and 3) offer some comments about income inequality. I’ll also discuss Roth’s presumptions.

I commend Roth for having acknowledged that market capitalism creates “immense, world-changing, manifest benefits.” (It would have been much better had he elaborated on how truly marvelous, wonderful, ^[ii] and essential “market capitalism” is to the creation of massive innovation^[iii] and the wealth that he is so anxious to redistribute, but we should cut him some slack because no one article can contain everything that needs to be said on any subject.)

Let’s also be charitable and assume that Roth meant to say something reasonable about “market capitalism” like, “as a general rule, 1) ‘market capitalism’ tends to distribute wealth into the hands of people who make or do things that satisfy the wants and needs of others, 2) distribution is roughly in proportion to the quality (as measured by the people who need or desire the things) and quantity of things people produce, 3) because of their varying combinations of skill, effort, perseverance, and luck, some people are exponentially better at producing needed and desired things than others,^[iv] and, as a result, 4) money tends to exponentially wind up in the hands of the exponentially more productive people.” That would have been an accurate statement. (The implications of this accurate statement on the subject, however, are quite different from the implications of the actual statement Roth made.)

Some will surely protest that the general rule described above is too full of exceptions to stand. I would counter that the vast majority of exceptions to the general rule in free markets of money flowing into hands in rough proportion to the value of the things produced by those hands arises when government gets involved in business (or via voluntary charity). When government passes laws or regulations that create competitive advantages for particular companies or regulators enforce unbiased laws or regulations in such a way as to protect certain businesses from the vicissitudes of a free market, government is thereby directing the flow of money to some companies and away from others that could otherwise compete for the funds in the marketplace. Indeed, the fact that people spend vast amounts of time, money, and effort lobbying the government to intercede on their behalf vividly helps prove this rule. (Stated differently, this is about the need of people/companies to be protected from the competition that a free market would generate.)

In my discussion of Roth’s article, it is important for me to acknowledge that income inequality creates many problems for some individuals and for society—as my blog posts on income inequality often state. Among those many problems, income inequality 1) engenders unhappiness in several ways, including a) jealousy and envy,^[v] b) various combinations of guilt, embarrassment, self-deprecation, and hopelessness (from not having the ability, drive, and/or “it” to achieve as much as others or falling short of the expectations imposed by others or by oneself), 2) heightened awareness of cosmic unfairness (some call it “social injustice”^[vi]), and 3) anger. Too much anger in too many people can result in riots, revolutions, police states, or anarchy. These negative effects of income inequality alone create great challenges for society. Some lay on the doorstep of income inequality many other evils, including mass death. While some common claims in this regard are overblown or bogus, there is some merit to most of the claims of the negative effects of income inequality. As discussed in my “Solutions” post, however, believing that the existence of a problem means that government can both solve and afford to solve the problem is childish. Additionally, given all of the problems created by government action, blind faith that a proposed government “solution” will cure more problems than it creates is folly. There are, of course, situations in which government “solutions” do more good than harm, e.g., our justice system. It is very likely that there are no government programs that do not create many harms and injustices, e.g., our justice system.

I find leftists to be all over the place as to exactly what the goals of redistribution are. The stated goals include: 1) it is economically advantageous to society (this is the primary focus of Roth’s article), 2) taking from the rich and giving to the poor is what moral people do (generally without regard to the effect of doing so has on the economy, innovation,^[vii] or anything else—including the harm done to the intended recipients of the redistributed wealth and their descendants), 3) the poor deserve help (usually without regard for any culpability a person may have for her state of affairs^[viii] and often based on imaginary or grossly overblown metrics), 4) the world will be a better place the more “we” redistribute, 5) it enables people to be healthier, thereby causing them to be more productive, 6) it will extend the lives of more people, thereby leading to more innovation, and 8) if “we” do not massively redistribute, the rabble will burn the place down. Note how strange bedfellows some of these goals are to others—some actually work at cross-purposes to others. For example, is support for redistribution motivated by caring for others or saving oneself from rioters and revolutionaries? The fact that there are so many justifications might be an indication of how uncompelling or insufficient each justification is.

Nevertheless, the problems created by income inequality cannot be safely ignored by society. It would have been fair for Roth to have discussed the evils of income inequality, but he did not do that. Rather, he appears to presume that income inequality is uncompromisingly bad and that massively reducing it would be an unalloyed benefit to both society and the recipients of the redistributed wealth. He also appears to believe either that forcible “massive redistribution” by the state cures the problems of income inequality (of course it cannot^[ix]) or, at a minimum, that it does more good than harm.

Standing atop some combination of inconsistent, flawed, and/or highly compromised presuppositions, Roth advances flawed economic claims as to “Why Welfare and Redistribution Saves Capitalism from Itself.” We will return to that in the next part.

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^[i] If you haven’t already done so, please read the article, but please also suspend any belief that it makes a lick of sense until you’ve read my several posts about the article.

^[ii] See “It’s A Wonderful Loaf” by Russ Roberts

^[iii] See “Income Inequality Is More Than It is Cracked Up To Be.”

^[iv] See “Jordan Peterson on creative productivity and the One Percent.” (What Dr. Peterson says here is a fair and accurate discussion of the general state of affairs with respect to highly productive people. I do not, however, vouch for the precision of his numbers, as they might not apply to every organization. Also, his discussion of Monopoly is highly instructive, but only roughly correlates to the real world. Nevertheless, as usual, Peterson nails the big picture.)

^[v] “Deirdre McCloskey on the ethics of income equality.”

^[vi] See “What is Social Justice?”

^[vii] For discussions of the many benefits of income inequality see, “Income Inequality Is More Than It is Cracked Up To Be,” “Wealth,” and “Wealth Creation – It’s For The Children, and their children, and their children. . . .”

^[viii] See “Equal Rights or Equal Outcomes?”

^[ix] See “‘You will always have the poor among you. . . .’”